Employer Sanctions Update 2008

May 2008

On April 28, 2008, the Arizona State Legislature passed a bill amending Arizona’s Fair and Legal Employment Act (the “Act”), which is also known as the “Employer Sanctions law.” Under the Act, Arizona employers are required to use the Federal E-Verify Program, and if an employer is found to have knowingly or intentionally employed an unauthorized worker, it is subject to suspension or termination of its business licenses. Governor Janet Napolitano signed the bill into law on May 1, 2008 with immediate effect.

What Does this Mean?

The Legislature hopes its actions will clarify several questions that have arisen about the Act. In particular, the recently passed law provides the following revisions:

The enforcement portions of the Act do not apply to employees who were hired before the Act took effect on January 1, 2008.

If a business contracts for labor knowing the contractor is an unauthorized worker or an entity that employs unauthorized workers, the business has violated the Act.

License suspension or termination will apply only to business locations where the violation is found to have occurred. (In other words, if an employer with multiple offices has its business license suspended or terminated under the Act, only the involved office will be affected.)

In addition, there are several new provisions that have been added to the Act:

Businesses must enroll in E-Verify to receive economic • development incentives from a government entity after September 1, 2008. Economic development incentives are any grant, loan or performance-based incentives from any government entity, but does not include any tax provision under title 42 or 43.

To receive a State government contract after September 1, • 2008, businesses must participate in E-Verify.

Employers with two or more employees who are paid in cash must comply with income tax, unemployment, and workers’ compensation withholding laws, and must include those employees in a New Hire Directory filing with the Department of Economic Security. Employers who fail to do so may be subject to a minimum fine of $5000 for each employee out of compliance.

Employers may participate in a voluntary incentive • program in which they file an affidavit guaranteeing compliance with the Act.

Persons who accept the personal identity information • from a new hire knowing that information belongs to someone other than that new hire, are guilty of identity theft, a Class 4 felony.

The recently passed bill does not change the availability of anonymous complaints for reporting suspected violations of the Act.

Possible Future Changes

In addition to this bill, two petitions are currently in circulation to add initiatives to the November ballot to amend the Act. One, entitled the “Support Legal Arizona Workers,” would mandate permanent revocation of business licenses upon the first violation of the Act. Another, entitled “Stop Illegal Hiring,” would take away the availability of anonymous complaints for reporting violations of the Act, and would require fines collected under the Act be distributed to schools and hospitals. If an initiative becomes law, none of its provisions may be repealed by an act of the Legislature, and the Legislature may only amend the law by supermajority vote.